We have a specialist for this!
People often ask us, what’s the difference between a residential and a commercial mortgage broker? Is it all the same?
There’s tons of mortgage brokers out there that claim to do commercial mortgages, but most of them just can’t get the job done and fall flat on their face. Why is that?
For starters, commercial mortgages are completely different than residential mortgages. Qualifying for the mortgage, terms, rates, and fees; it’s all different in the commercial lending world. Commercial mortgages aren’t really as “cookie cutter” as some residential mortgages can be. What we’re saying is, that for the job of getting a commercial mortgage, you need a real specialist on your side.
So we went out and hired the best possible person that specializes in commercial mortgages.
Steve Ennis is our commercial guru. He’s got a great track record and 12 years of commercial banking experience in major banks and credit unions behind him. Steve has personal connections with lots of lenders, and really has his ear to the ground on which lenders are out there. More importantly, Steve understands what his lenders are looking for, and what their appetite is for certain commercial mortgages. Some will do development, some won’t. Others focus on cash flow of a business, while others are more concerned about the property type. Whatever the criteria, Steve knows. He’s the guru.
Just as important as having lender connections, Steve has expertise is qualifying and preparing a deal for submission. There’s a lot that goes into making your commercial application perfect, and no one does it better than Steve! We may be repeating ourselves, but being a commercial lender for 12 years has given Steven the experience and know how to deal with the complexities that are, commercial mortgages.
Steve goes into super detail on each deal, and you can see that. Questions like the following become very relevant with a commercial transactions…
- What is the zoning of the property (i.e. industrial? Office? Retail?)
- Does the company have debt with other lenders? (This one can kill a deal);
- Does the normalized cash flow meet the 1.25x debt service coverage ratio?;
- What are the cap rates, lease rates, and vacancy rates for the subject property?;
- Is the property for your business? To be held as an investment? Construction project?;
- What is the management experience?
When it comes down to it, Steve is the right guy for the job. He knows how to get your commercial mortgage application off the ground, and ultimately, approved. He’s got the expertise, and the lender connections. Steve is hungry to help his clients businesses off the ground and loves seeing his clients prosper!
Steve’s also a super guy! You can spot his keen smile across the room, and he’s the kind of guy people want to be around. He loves having coffee and learning about businesses. Steve is a force to be reckoned with, and we’re super grateful to have him as our go to commercial guru.
So go ahead and call Steve, and experience the difference. You’ll be glad you did. Don’t worry, you can thank us later.
Your business needs financing, should your company get the loan? Or should you borrow in your personal name and then inject the funds into your company as a ‘shareholder loan’?
Here’s a recent deal we just did. As we do with all our case studies, we change the names and basic details.
Andrew owns a small food processing business and was in need of a cash to purchase raw fruits and vegetables to start drying and processing into powder for a variety of applications.
First Andrew went to his bank to request a $250,000 loan in the name of his company, before coming to me to discuss leveraging up his house for the funds.
Andrew quickly discovers that the commercial loan comes with a lot more fees and a higher interest rate. On the commercial side, the bank would have charged an application fee ($2,500); a $75 monthly administration fee; and a $500 annual review fee. The bank also requires Andrew’s company’s financial statements on an annual basis from his accountant at a cost of $1,500 per year. None of this was required when borrowing in his personal name.
Andrew wanted to know what was involved in an “annual review” of the company. So I told him, every year the bank will collect the following:
– Accountant prepare financial statement for the company;
– A list of his personal assets and liabilities;
– Your personal credit bureau; and
– Any other information they think they need to do a full assessment.
Once they have this information they’ll perform a full review and decide if you are an “acceptable risk” to take on for another 12 months. But if they see something they don’t like there could be consequences! They could increase your interest rate, ask for more security, or even ask you to pay out the loan completely.
In his personal name, Andrew had a house with virtually no debt outstanding, a great credit score, and he had been taking out enough of a personal income to qualify for the mortgage against his home.
So it’s a pretty easy decision for Andrew. He discovers that the interest rate was 2.0% lower when borrowing in his personal name. Second, there were ZERO fees with personal financing as opposed to all the fees that come with commercial financing. Also, no reporting requirements on the personal loan, except to just make the payments as agreed.
We also talked to his accountant and confirmed that even though the financing wasn’t his company name, he could still write off the interest since it was for “company purposes”
For Andrew, the process of borrowing in his personal name and injecting into the company was cheaper, faster, and much less burdensome. At Olympic Mortgages, whether the client comes to us needing commercial or residential financing, we make sure to lay out all options that are available to that client, and really put some serious strategy into their situation. The client comes out ahead, and the client is thanking us everyday for advising him on the right thing to do. Win win.